GST Treatment of Cross Border Transport: Minor Amendments - Consultation Paper October 2012
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GST Treatment of Cross Border Transport:
Minor Amendments
Consultation Paper
October 2012© Commonwealth of Australia 2011
ISBN 978-0-642-47413-6
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3.0 Australia Licence.
The Commonwealth of Australia does not necessarily endorse the content of this publicationREQUEST FOR FEEDBACK AND COMMENTS
The Treasury is seeking your feedback and comments on an approach that could be adopted to
address the compliance difficulties for the transport and related services industry in relation to the
international transport of goods and certain services associated with the international transport and
importation of goods.
While submissions may be lodged electronically or by post, electronic lodgement is preferred. For
accessibility reasons, please email responses in a Word or RTF format. An additional PDF version may
also be submitted.
All information (including name and address details) contained in submissions will be made available
to the public on the Treasury website, unless you indicate that you would like all or part of your
submission to remain in-confidence. Automatically generated confidentiality statements in emails do
not suffice for this purpose. Respondents who would like part of their submission to remain in-
confidence should provide this information marked as such in a separate attachment. A request
made under the Freedom of Information Act 1982 (Commonwealth) for a submission marked
‘confidential’ to be made available will be determined in accordance with that Act.
Closing date for submissions: 7 November 2012
Email: CrossBorder@treasury.gov.au
Mail: The General Manager
Indirect Tax Division
The Treasury
Langton Crescent
PARKES ACT 2600
Enquiries: Enquiries can be initially directed to Mr Richard Cook
Phone: 02 6263 3337
iiiCONTENTS
1. BACKGROUND ................................................................................................................................ 1
1.1 Purpose of this paper .............................................................................................................................. 1
1.2 Development and operation of the law .................................................................................................. 1
2. ISSUES .......................................................................................................................................... 4
2.1 Shipping and Airline Issues ...................................................................................................................... 4
2.2 Custom Brokers and Freight Forwarder issues ....................................................................................... 5
3. A SOLUTION FOR ESTIMATING THE VALUE OF TRANSPORT AND RELATED SERVICES.......................................... 6
3.1 Alternative method for calculating GST .................................................................................................. 6
4. AN APPROACH TO ADDRESS THE PRACTICAL ISSUES FOR THOSE ENTITIES PROVIDING INTERNATIONAL
TRANSPORT OR ARRANGING SUCH TRANSPORT AND RELATED SERVICES ....................................................... 7
4.1 Part A: All supplies under a contract of carriage to be GST-free............................................................. 8
4.2 Part B: Domestic services carried out by domestic suppliers would be GST-free in certain
circumstances. ................................................................................................................................. 10
4.3 Part C: VoTI calculation to include GST-free supplies under Part A and B. ........................................... 12
5. NEXT STEPS ................................................................................................................................. 131. BACKGROUND
1.1 PURPOSE OF THIS PAPER
1. All legislative references in this paper are to the A New Tax System (Goods and Services Tax)
Act 1999 (“GST Act”). A reference to GST Law in this paper includes the GST Act and any
supporting or associated legislation. A reference in this paper to “port” includes a reference to
“airport”, unless otherwise specified.
2. In July 2010, amendments 1 were made to the GST Act to, among other things, ease compliance
costs for businesses involved in the international transport of goods and certain services
associated with the international transport and importation of goods (“2010 GST transport
amendments”).
3. Following the 2010 GST transport amendments, the Australian Taxation Office (ATO) received
information from taxpayers advising that some segments of the transport and related services
industry may have difficulty in complying with the new law. The ATO has informed Treasury
that these difficulties cannot be resolved through ATO administration and it is therefore likely
that only further legislative change will provide a means of addressing these concerns.
4. This paper sets out an approach that could be adopted to amend the relevant parts of the GST
law to address the compliance difficulties. It is intended that this paper will serve as a basis for
discussion with the transport and related services industry in the hope of fully clarifying all the
difficulties and identifying viable solutions.
1.2 DEVELOPMENT AND OPERATION OF THE LAW
5. When the GST law was introduced in 2000, the transport industry relied on two private rulings
issued in June 2000 to the Australian Federation of International Forwarders. These stated that
under item 2 in the table in s38-190(1) of the GST Act, the supply of domestic transport to a
non-resident entity for an imported good was a GST-free supply.
6. In 2005 the ATO released a ruling (GSTR 2005/6) which took the view that:
• The supply of transport and relevant services by an Australian entity to a non-resident is
subject to GST if the goods are delivered by the Australian entity to an addressee in
Australia; and
• Non-residents that have a contractual obligation to deliver goods in Australia will be
making a taxable supply in Australia if that obligation is performed by an Australian
subcontractor.
7. The transport and related services industry maintained that the ATO’s interpretation of the law
created significant compliance difficulties, particularly for international transport providers
that deliver, or arrange for the delivery of, goods to an address in Australia on behalf of
1
Tax laws Amendment (2010 GST Administration Measures No. 3) Act 2010
1overseas sellers, e.g. DDP (Delivery Duty paid) or DAP (Delivered at Place) - formerly DDU
(Delivered Duty Unpaid)) terms of trade.
8. The Government announced on 12 May 2009 that it would amend the GST law, with effect
from 1 July 2010, to reduce GST compliance costs for businesses involved in the domestic
transport of exported and imported goods. These amendments were contained in Tax Laws
Amendment (2010 GST Administration Measures No 3) Act 2010.
Aim of 2010 GST transport amendments
9. The 2010 GST transport amendments provided, among other things, that the liability to pay
GST on Australian transport and other services that are part of the international transport of
goods to Australia was (in most cases) shifted from transport and associated service suppliers
to the importer of the goods.
10. The key advantage of this shift was that the GST on the domestic services that are part of the
international transport of goods would be calculated and collected at a single point at the
border, rather than at multiple points in a chain of contracts involving both resident and non-
resident transport companies. The intention of this change was, among other things, to
reduce the number of non-residents making taxable supplies and incurring input tax, thereby
reducing the need for non-resident involvement in the Australian GST system. Removing the
need for these non-residents to register for Australian GST also reduced the likelihood of GST
becoming embedded in the price of imported goods due to non-registered entities passing on
non-recoverable GST. The changes were intended to be revenue neutral.
Current Law
11. Items 5 and 5A of s38-355(1) of the GST Act provides that the international transport of goods
from a place outside Australia to their place of consignment (as amended) in Australia is GST-
free, as are the related loading, handling and facilitation services.
12. The 2010 GST transport amendments provide that the place of consignment will generally be
based on contractual arrangements (primary agreement) between the buyer and the supplier
of goods or the buyer and their freight forwarder. For non-postal goods (31.5kg or heavier),
the place of consignment is determined under the GST Act as follows:
• If a non-resident supplier of goods has agreed to deliver the goods to Australia, the
place of consignment is the delivery place within Australia as determined under the
contract for the supply of goods - (paragraph (aa) of the definition of place of
consignment in section 195-1 of the GST Act). If the supplier supplies goods under DAP
or DDP terms of trade, this will be the delivery address in Australia. If the supplier
supplies goods under CIF (Cost, Insurance and Freight) terms of trade, the place of
consignment would be the destination prior to the goods being unloaded;
• If paragraph (aa) of the definition of “place of consignment” does not apply and a
transport provider is contracted by the importer of the goods to transport the goods to
Australia, then the place of consignment is the place in Australia where the goods are to
be delivered under the contract for the supply of the transport service - (paragraph (ab)
of the definition of place of consignment in section 195-1 of the GST Act).
2If the importer of the goods, or an entity acting on behalf of the importer (such as a
Customs Broker or Forwarder), instructs a Forwarder or transport company to transport
the goods to Australia, because the goods are sold to the importer under FOB or EXW
terms of trade, then the place of consignment will be the address to which the importer
instructs the international transport and related services company to deliver the goods
(whether that be the port of arrival or the importer’s premises or indeed another
location within Australia). The GST treatment of services supplied in Australia as part of
this service is currently being applied inconsistently across the transport and related
services industries.
If the goods are delivered to Australia under CIF terms of trade, generally an Australian
importer would instruct an Australian Broker or Forwarder to clear the goods through
Customs and possibly transport them to the importer’s premises. Currently this service
would be taxable, as the forwarder or broker is not the supplier of the transport of the
goods to Australia;
• In any other case – the port or airport of final destination as indicated on the
transportation document.
13. The 2010 GST transport amendments expanded the scope of GST-free supplies of international
transport, by extending GST-free treatment to the place of delivery of goods with specific
reference to the primary agreement for the international transport of the goods to Australia. 2
14. The treatment for loading, handling and other services that facilitate the international
transport of goods (including customs clearance services) was also legislated as GST-free in
these amendments in cases where these services were performed by the supplier who
transported the goods to or from Australia or supplied to a non-resident who was not in
Australia. However, these services are not GST-free if they are performed to facilitate the
transport of the goods after they reach the place of consignment or before the place of
export. 3
15. Where the international transport of goods to Australia and the associated loading, handling
and facilitation services have been made GST-free under these provisions, the cost of that
transport and those services will be included in the calculation of ‘the value of the taxable
importation’ (VoTI) for the purposes of paragraph 13-20(2)(ba) of the GST Act. This serves to
ensure that the importer of goods is liable for the GST, rather than non-resident transport
service suppliers who are not in Australia. In certain circumstances, the value of the Australian
leg of the international transport of imported goods will also be included in the VoTI. 4 It also
ensures symmetry between the VoTI and the GST legislation covering GST-free supplies.
2
Explanatory Memorandum to Tax Laws Amendment (2010 GST Administration Measures No. 3) Act 2010.
3
ibid, para 1.14
4
Explanatory Memorandum to Tax Laws Amendment (2010 GST Administration Measures No. 3) Act 2010, para 1.13
32. ISSUES
2.1 SHIPPING AND AIRLINE ISSUES
16. A shipping or airline contract of carriage under the bill of lading or air waybill respectively, will
be for the supply of transport services from the port of origin to the port of destination, and
will include services undertaken at both places.
17. We understand that the practical problems faced by the shipping and airline companies stem
from the fact that their contractual obligation will be to transport goods from ‘port gate’ to
‘port gate’, which is an international standard. However, the place of consignment provisions
in the GST law provide that the ‘international transport’ of these goods could end at a point
before, at, or beyond the ‘port gate’ in Australia, depending on the nature of the primary
contract and the terms of trade under which this contract was arranged.
18. Furthermore, shipping and airline companies may be engaged by an exporter, importer or
forwarder acting for one of these parties. The shipping and airline companies will generally not
have access to primary documentation (such as contracts of sale) to identify or confirm the
‘place of consignment’. Rather, the shipping and airline companies will enter into a contract of
carriage with a counterparty which will include, among other things, instructions to transport
goods to a certain location and bill certain parties. The billing arrangements under shipping
and airline contracts of carriage do not necessarily reflect the terms of trade specified in a sale
of goods contract.
19. The transport and related services industry has advised that the importer’s sale of goods
contracts are usually commercial-in-confidence, and therefore are unlikely to be made freely
available to entities that are not a party to the relevant contract.
20. As a consequence, in cases where the international shipping and airline entities do not have
access to the relevant sale of goods contracts, they will not know whether to apply GST on the
loading, handling and facilitation services conducted at the port as they cannot determine with
certainty where the ‘international transport’ ends.
21. The below diagram shows the place of consignment relevant to three different sale of goods
agreements. We note that the GST consequences for goods sold under DAP terms of trade are
the same as those applying to goods sold under DDP terms of trade.
4PortGate Ships Rail Ships Rail Port Gate Premises
FOB Seller Purchaser/Importer
place of consignment
as per paragraph (ab) of
definition. It can be anywhere
between port gate & premises)
CIF Seller Purchaser/Importer
place of consignment as per
paragraph (aa) of definition
DDP Seller
Shipping Co /
Airline Co Gate to Gate Service
(Gate to Gate Service)
place of consignment is usually unknown for ships and airline.
In a CIF arrangement services at port are not GST-free as they are
beyond the place of consignment
22. In relation to the above diagram, we note the following:
• Where the seller sells the goods under free on board (FOB) terms of trade, the seller
does not transport the goods to Australia, with the result that the relevant primary
agreement is the transport contract with the importer.
• In both cost insurance freight (CIF) and delivered duty paid (DDP) terms of trade, the
seller has agreed to deliver the goods to a location in Australia, we note that those
locations differ. For sales of goods under these terms of trade the place of consignment
is where the seller’s responsibility for delivery ends. The relevant primary agreement in
these circumstances is the sale of goods contract with the supplier of the goods.
• Under all these three arrangements, the shipping company will not have any direct
knowledge where the place of consignment will be. We understand that the airline
industry has similar concerns. Generally, international shipping and airline companies
will be engaged by a freight forwarder or customs broker who will provide billing and
delivery instructions.
2.2 CUSTOM BROKERS AND FREIGHT FORWARDER ISSUES
23. Customs Brokers and Freight Forwarders are engaged to provide services (including customs
clearance services, arranging transport and other services) related to the importation and
exportation of goods. Customs Brokers may also be freight forwarders and vice versa. The
5transport and related services industry has advised that the GST compliance difficulties for
Customs Brokers and Forwarders are essentially threefold, that is:
• Similar to shipping and airline companies, Customs Brokers and Forwarders must make
GST compliance decisions based on primary documents that may not be readily available
to them. We note that Customs Brokers and Forwarders would generally receive a copy
of an invoice for the sale of goods, but they ordinarily will not have access to a contract
of sale (which will evidence the terms of trade).
• When engaged by an Australian importer, we understand that the IT systems used by
Brokers and Forwarders may only allow a single rate of GST to apply to the same service.
Currently, these services are treated as taxable. Under the 2010 GST transport
amendments, these charges may be GST-free if the importer engages a Broker or
Forwarder to arrange for the international transport, or taxable if the importer had
engaged the broker or forwarder to provide only domestic services. Even if Brokers and
Forwarders could configure their systems to comply in these circumstances, the GST
compliance risks for Brokers and Forwarders would be significant.
• Customs Brokers do not necessarily have timely access to documentation, or will not
know the full cost of transport of the goods to the place of consignment, where that
information needs to be included in the VoTI. In the absence of the actual costs, the
practice has been that brokers estimate the cost, but they are required to make GST
adjustments when the actual cost is known, adding to compliance costs.
24. The transport and related services industry has asked that, if a place of consignment
contemplates a place beyond the port or airport, the GST law should recognise the
appropriateness of, or a method to simply determine, the VoTI, if all the necessary information
is not available to the broker at the time of importation.
3. A SOLUTION FOR ESTIMATING THE VALUE OF TRANSPORT AND
RELATED SERVICES
3.1 ALTERNATIVE METHOD FOR CALCULATING GST
25. The concerns around the calculation of GST raised by the Customs brokers and freight
forwarders were canvassed by the Board of Taxation (the Board) in its Review of the GST
Cross-Border Transactions in February 2010.
26. Amongst the Board’s recommendations agreed to by the Government, and announced in the
2010-11 Budget, was one relating to simplifying the calculation of GST at the border.
27. Specifically, the Government announced that, for the purposes of calculating the value of a
taxable importation for GST purposes, GST registered importers will be able to calculate the
transport and insurance costs as the actual amount paid or payable, or alternatively, use an
uplifted percentage of the customs value of the goods imported. The uplifted percentage will
be 10 per cent.
628. Implementing this recommendation will mean that GST registered importers/customs brokers
could choose to calculate the transport and insurance amount 5 to be included in the
calculation of the value of the taxable importation as the actual amount paid or payable, or
alternatively, an amount equal to 10 per cent of the customs value of the goods imported. In
choosing this alternative, no subsequent adjustments to reflect actual costs will be necessary.
This should provide opportunities for compliance cost savings.
29. The change would apply to all GST registered importers, but not for goods where WET or LCT is
required to be paid, as this would impact adversely on the calculation of the relevant tax
liability on such goods.
30. This method will also not be available to importers that are not registered for GST. These
importers would not be entitled to any offsetting input tax credits, which means they would
bear the cost of the additional GST where the alternative method results in a higher VoTI than
in cases where the actual cost of transport and insurance is used.
31. Once legislated, this method should address some of the difficulties faced by the Custom
Brokers and Freight Forwarders in calculating the VoTI where actual international transport
and insurance costs are not known at the time of importation. This solution should work
effectively alongside the strategy proposed below to resolve other issues faced by shipping
and airline entities.
Focus question
Q1: Should the uplift be the default position and the entity making the taxable importation
having an entitlement to use actual amounts if they so choose?
Q2: It is currently proposed that the uplift option only be available for GST registered
taxpayers. What compliance concerns do you have if the uplift option is not available to all
entities making the taxable importations (i.e. unregistered importers)?
4. AN APPROACH TO ADDRESS THE PRACTICAL ISSUES FOR THOSE
ENTITIES PROVIDING INTERNATIONAL TRANSPORT OR ARRANGING
SUCH TRANSPORT AND RELATED SERVICES
32. The approach outlined is aimed at addressing the practical problems faced by suppliers of
international transport and/or related services.
33. Part A concerns supplies by suppliers who enter into a contract of carriage to transport goods
to Australia as GST-free. This option is aimed at allowing suppliers who issue a contract of
carriage to determine the GST status of their supply from their own contractual arrangements.
5
This would also include loading, handling and ancillary costs that form part of the international transportation of goods.
7A greater understanding of what supplies other than transport services are included under a
contract of carriage is required to determine if any restrictions are needed to limit the services
that may be GST-free.
34. Part B relates to suppliers of ‘arranging’ services and to suppliers that have not entered into
the contract of carriage, but are subcontracted by another party to provide services that do fall
under a contract of carriage or to complete the importation process. Generally, these services
will only be GST-free if supplied to a non-resident who is not in Australia.
35. Part C will endeavour to ensure that those supplies made GST-free under the previous two
Parts will be included in the VoTI calculation in s13-20(2) of the GST Act, while also ensuring
that such amounts are not counted twice. Part C will be implemented in conjunction with the
solution for estimating the value of transport and related services described above in
Section 3.
Focus question
Q3: In considering the various Parts below, please consider whether any will create
undesirable impacts on domestic transport providers, specifically in relation to the GST status
of the transport services they provide?
4.1 PART A: ALL SUPPLIES UNDER A CONTRACT OF CARRIAGE TO BE GST-FREE
36. Under this Part, provisions in the GST Act (such as item 5 of s38-355(1)) will provide for GST-
free treatment for those suppliers who issue the contract of carriage. 6
37. Generally, there are two main categories of documentation of carriage:
• house bill of lading or house air waybill –For the purposes of importing goods into
Australia, a house bill of lading or house air waybill will usually be issued by an overseas
freight forwarder or similar enterprise. A contract of carriage evidenced by a house bill
of lading or house air waybill, unless otherwise stated, will end at the port of destination
(that being the port gate in question).
• ocean bill of lading or master air waybill - These documents are issued by a shipping
company or airline and evidence a subcontract of the contract of carriage referred to
above.
38. The GST law could be amended, specifically Item 5 of s38-355(1), to treat all supplies by the
issuer of the contract of carriage under both forms of contracts mentioned above as GST-free
in their entirety. This would mean that the supplier, or issuer of the contract, would be making
6
The contract to transport goods to Australia refers to the one entered into by the respective transport entity (airline or
shipping company), or freight forwarder which may, or may not, also be the primary contract considered under the
existing GST law in determining the place of consignment.
8GST-free supplies. These supplies are generally made to the consignor or consignee of the
goods.
39. To achieve this outcome with greater clarity, the current link to the place of consignment
within item 5 of s38-355(1) may need to be removed. We understand that shipping and airline
companies do not have access to the relevant contractual arrangements to determine the
place of consignment of the goods. These changes are aimed to removing that problem by
allowing these suppliers to determine the GST status of their supplies from their own
documents.
40. Consequently, the VoTI calculation would also require modification to capture all amounts for
supplies rendered GST-free by this new item 5 (refer to Part C below). The essential aspect of
this modification is that there should be no double counting of amounts for supplies that have
been made GST-free. In respect of the VoTI calculation, the amounts payable under the house
bill of lading or house air waybill would be captured. This is due to the fact that the ocean bill
of lading or air waybill would be included as part of the amount identified under the house bill
of lading or house air waybill.
41. An advantage of this approach is its simplicity:
• Affected entities would not need to know or consider the place of consignment (as
currently defined) and therefore suppliers who enter into a contract of carriage will be
able to determine the GST status of their supplies more easily;
• All the supplies under a contract of carriage, supplied by the issuer of the contract of
carriage to the consignee or consignor would be GST-free, even those occurring beyond
the port or airport gate. Therefore all supplies under that contract should be treated in
the same way for GST purposes.
Focus question
Q4: For those suppliers who supply a door to door service, will these changes impact on your
existing arrangements? In particular:
- We would like confirmation that the house bill of lading or house airway bill that you
issue represents a contract of carriage?
- If so, does that contract of carriage stipulate the place the goods are collected and the
place the goods are to be left within Australia?
- Alternatively what documents do detail the door to door arrangement?
42. A contract of carriage for goods coming to Australia is often issued by a non-resident. The non-
resident supplier will be either a non-resident freight forwarder or a non-resident shipping or
airline company. The services under a contract of carriage are supplied to the consignor or
consignee or both. However, often a domestic freight forwarder can invoice the consignee on
behalf of the non-resident freight forwarder for services carried out under the contract of
carriage, and also charge the consignee services carried out by the domestic freight forwarder
9that are not covered by the contract of carriage. Accordingly, a law change that focuses on the
services that are required to be carried out under a contract of carriage may need clarity as to
what services are covered by a contract or carriage and those that are not.
43. Services invoiced to the consignor or consignee that are not covered by the contract of
carriage will only be GST-free if Part B applies.
44. Additionally, consideration may need to be given as to whether services outside of the
standard terms and conditions but form part of the contract of carriage, should only be GST-
free if Part B applies. For example, under most contracts of carriage, if goods are not collected
within a certain period of time (for example, 3 days) then further charges will apply for
extended storage costs. If charges for these additional services were payable well after the
charges under the standard terms and conditions then this could present compliance
difficulties in determining the VOTI calculation. There may also be additional difficulties in
identifying if these services form part of the contract of carriage.
45. The ATO could provide guidance material on what can be included in the contract of carriage
under Part A.
Focus question
Q5: What services are included in the standard terms and conditions of a typical contract of
carriage? How should the GST law apply to services that are outside the standard terms and
conditions, for example, storage costs greater than the allowed collection time?
4.2 PART B: DOMESTIC SERVICES CARRIED OUT BY DOMESTIC SUPPLIERS WOULD BE GST-FREE
IN CERTAIN CIRCUMSTANCES
46. Under Part B, it is proposed that transport and related services performed within Australia that
are supplied by domestic entities who are not a party to the contract of carriage (as described
in Part A above), would be GST-free in certain situations.
47. Consideration has been given as to whether this proposal could be expanded to cover all
supplies carried out at the port of destination regardless of who the recipient of the supply is.
However, this is beyond the scope of the Government’s announcement and it could potentially
give rise to complexities in determining what supplies would qualify for GST-free treatment.
48. Services to be considered under Part B may include:
• subcontracted services - services that need to be carried out under the contract of
carriage but are performed under a subcontracting arrangement by suppliers who are
not a party to the contract of carriage. For example, this may include stevedores,
storage suppliers and domestic transport suppliers;
• services outside the contract of carriage - these are the services that are required to be
carried out to complete the importation process but may not form part of the contract
of carriage. For example, fumigation and custom broking services; and
10• arranging services – these will include services provided by suppliers who organise, on
behalf of another entity, for services to be carried out.
Subcontracted services
49. Services that are required to be carried out under a contract of carriage but are supplied by
domestic suppliers who are not a party to the contract of carriage would only be GST-free in
circumstances where they are made to a non-resident who is not in Australia when the service
is done. This outcome is consistent with the existing policy outcome for subcontractors
because of the limitation placed on item 5 and 5A of s38-355(1) by s 38-355(2). A non-resident
company would be considered as being in Australia if that non-resident carries on business
through an agent at a fixed and definite place for a sufficiently substantial period of time.
50. The outcome of this policy position is that subcontracted supplies between entities that are in
Australia are not GST-free.
• Non-resident shipping companies usually use the services of Australian based shipping
agents to engage service providers within Australian ports such as stevedores, on behalf
of the non-resident shipping company. That agent would be eligible under Division 57 of
the GST Act to claim any input taxed credits if that non-resident shipping company was
registered or required to be registered for GST. Many shipping companies are registered
or required to be registered for GST. The services of a stevedore that are made to a non-
resident shipping company through an Australian based shipping agent would not be
GST-free as per the existing rules.
• A domestic transport company that is contracted by a domestic freight forwarder to pick
up goods at the Melbourne port and transport them to country Victoria would be
making a taxable supply. Accordingly, a domestic transport company engaged by an
entity in Australia that transports domestic and imported goods would not have a
different GST treatment for the imported goods.
51. However as per Part A, the above services would be made GST-free when on-supplied to the
consignor or consignee by a party to the contract of carriage or an entity acting on the
person’s behalf. Any on-supply of domestic services that are not part of the contract of
carriage will only be GST-free if supplied to a non-resident who is not in Australia. This would
allow for those supplies of domestic and international transport and related services by an
Australian resident supplier to an Australian resident recipient under a single contract (such as
door to door arrangements) to continue to be GST-free. Conversely, if the contract of carriage
ends at the port of final destination then the on-charge of the domestic transport services
would not be GST-free.
Services outside the contract of carriage
52. Under the existing rules, the services that facilitate international transport are GST-free if
supplied to a non-resident who is not in Australia (item 5A in s38-355(1) as restricted by s38-
355(2)). Services that are essential in order for the goods to be cleared or released into home
consumption are considered to be services that facilitate international transport if that
international transport ended after the goods were cleared into home consumption. As with
subcontracted services no policy changes are considered necessary for these supplies.
11Focus question
Q6: Do you have any practical concerns about the above policy position for suppliers of the
services that are performed at the port or airport of final destination? Many of these services
will be acquired by suppliers, such as shipping companies, who will on-charge these expenses
in making a GST-free supply.
Arranging services
53. In implementing Part B of the proposed approach, it is envisaged that no change to item 7 in
s38-355(1) will be required. Item 7 is considered suitably broad enough to cover arranging
services performed by entities in Part B situations.
Focus question
Q7: Under what contractual arrangements will a supplier consider that they are supplying
arranging services as opposed to being engaged to supply transport services?
4.3 PART C: VOTI CALCULATION TO INCLUDE GST-FREE SUPPLIES UNDER PART A AND B
54. Part C of the proposed approach will ensure that GST-free supplies, as discussed above under
Part A and Part B, will be captured in the VoTI calculation. It needs to be noted that this
proposal will be implemented in conjunction with the solution for estimating the value of
transport and related services described in section 3.
55. Currently, the VoTI calculation in s13-20(2) of the Act includes those amounts paid or payable
for the international transport of goods to their place of consignment in Australia and amounts
paid or payable for services covered by 5A of s38-355(1).
56. An essential aspect of the proposed approach is that the VoTI calculation be structured so that
supplies that have been rendered GST-free only be accounted for within the VoTI calculation
once.
57. Costs identified as being GST-free under Part A should be included in the VoTI calculation.
However, if more than one contract of carriage is entered into for the one transport of goods
then the law should be made clear that it is the costs under the overarching contract of
carriage that should be included in the VoTI calculation. Accordingly, the costs under the house
bill of lading or house air waybill should be included, as the costs represented by the ocean bill
of lading or air waybill of lading will already be captured under these respective house bills.
58. The VoTI calculation should also be expanded to include those amounts paid or payable for
services covered by item 7 of s38-355(1), while continuing to pick up those amounts paid or
payable in relation to the international transport of goods and the respective loading, handling
and facilitation services.
1259. The advantages of this are that those supplies/services identified under items 5, 5A and 7 will
be treated in the same way, while the requirement for international transport entities to
register for GST in Australia should be minimised.
Focus question
Q8: To avoid double counting in the VoTI calculation of amounts that have been included
under s38-355(1), it is proposed that amounts paid in respect of the international transport of
the goods will relate to the house bill of lading or house air waybill rather than the ocean bill of
lading or master air waybill, where appropriate. Would this proposal pose any difficulties for
those entities calculating the VoTI?
5. NEXT STEPS
60. After this consultation process we would envisage developing a firm proposal to take to
Government and seek agreement for the preparation of draft legislation. We would propose
exposing the draft legislation for public comment prior to amending the law.
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